Written Commentary
NATURAL GAS
Clearly, last week’s talk of lower US production combined with warmer northern hemisphere temperatures and expanded US LNG export activity provided some spark for last Friday’s impressive rally. In fact, a major US gas exporter (Cheniere) saw profits rise on its export volumes, which is a clear break with their flows over the last several years. Perhaps the trade is also benefiting from long-term production reduction views after the US oil and gas rig count fell to the lowest level since January 2022 at the end of last week. However, this morning gas prices are plummeting despite signs of increased Asian LNG buying from Pete in the region. It should be noted the net spec and fund short at the end of last month was the largest net spec and fund short since the end of February 2020 (the zenith of the initial panic liquidation from Covid) with the market at times trading $0.08 lower than where the report was measured.
CRUDE OIL
Despite the large slide in prices over the last week, many global oil exporters have raised June prices to customers. Saudi hikes are typically the most important price signal, but several other Middle East exporters and the Brazilian national oil company have raised prices for June delivery. With the crude oil net spec and fund long positioning already modest before last week’s $6.00 washout, the crude oil market should see stop loss selling slow or halt. In fact, with international aid agencies preparing for an Israeli attack of a southern Gaza city, the dollar falling aggressively at the end of last week, and June crude oil reaching what has been a notable consolidation support level at $78.00 in the past the risk to fresh shorts has increased. On the other hand, talk of supply tightness has been punctured severely by news that US Gulf Coast crude supplies have reached a one-year high especially with weekly EIA and API crude oil inventories jumping dramatically last week. Certainly, strong US crude oil exports from earlier this year could resurface if the dollar continues lower, but in the near-term, US domestic supply issues are likely to favor the bear camp. In a minimally but widely anticipated development, OPEC+ is expected to extend their production restraint agreement next month, but that supportive storyline is partially undermined by Iraq and Kazakhstan plans to compensate the cartel for overproduction.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
